DeMon boost for digital payments: Economic Survey

DeMon boost for digital payments: Economic Survey

On the assumption that the process of remonetisation is complete, the Survey pointed out that cash as a share … Read More

There are early signs of widening of the tax base, greater use of electronic payment channels as well as lower cash in the economy post-demonetization, although the move to scrap old Rs 500 and Rs 1,000 notes resulted in deceleration of economic activity, with the informal sector facing the negative impact, the Economic Survey said.

BHIM-Aadhaar platform launched: 10 things to know

BHIM-Aadhaar platform launched: 10 things to know

Prime Minister Narendra Modi has launched BHIM-Aadhaar, the merchant interface of the Bharat Interface for Money (BHIM) mobile application. This enables Indian citizens to make digital payments using their biometric data such as their thumb imprint on a merchant’s biometric-enabled device. Here’s all you need to know about this new BHIM-Aadhaar platform.

How BHIM-Aadhaar Pay works

A merchant needs to download the BHIM-Aadhaar Pay app on his smartphone, connect the app to his bank account and link the phone to a biometric scan machine. To make payment, the customer just has to give his fingerprint. The customer must have an Aadhaar-linked bank account.

Your fingerprint is your password

Users with Aadhaar-linked to their bank accounts can make payments by authenticating the transaction via their fingerprint. The app uses biometric scans as passwords. This means that users can use their fingerprint or biometric data to validate a transaction. The merchants get paid through the user’s bank accounts.

No transaction fee (or MDR) for merchants

With BHIM Aadhaar platform, government has also done away with merchant discount rate (MDR) or transaction fee charged on debit card payments. MDR is the commission paid by the merchant to the acquiring bank for every transaction done on the Point of Sale (PoS) machine installed by the bank. A large portion of the MDR earned by the bank goes into paying interchange fees for the card issuing bank. The remaining part is paid to service providers such as Visa, MasterCard or National Payments Corp of India (NPCI).

It does not need internet connection

“Any citizen without access to smartphones, internet, debit or credit cards will be able to transact digitally through the BHIM-Aadhaar platform, thus realizing Dr Ambedkar’s vision of social and financial empowerment for all,” the government said in a statement. This means any user with Aadhaar number linked to his bank account can make the payment with this platform.

Makes cashless transactions possible for even those without smartphones

The app makes cashless transactions possible even for those who do not have mobile phones. However, the merchant accepting the payment has to have a mobile phone.

It needs your Aadhaar number to be linked with bank account/accounts

Though users don’t need any password or app, it is mandatory for them to have their Aadhaar number linked to their bank account/accounts to make the payment.

Based on APB and AEPS

According to Niti Aayog, Aadhaar Pay uses two platforms — Aadhaar Payment Bridge (APB) and Aadhaar-Enabled Payment System (AEPS). APB acts as repository between the banks and customers to provide a smooth flow of transactions, while AEPS helps in authenticating the online process.

For every successful referral, users can earn Rs 10

Prime Minister Narendra Modi announced incentive program for BHIM-Aadhaar digital payment platform for both users and merchants. Users can earn Rs 10. Under the referral bonus scheme, both the existing user who refers BHIM and the new user who adopts BHIM would get a cash bonus credited directly to their account.

Cash incentives for Merchants

Under the cashback scheme, the merchants will get a cashback on every transaction made using the BHIM app.

27 major banks on board

According to government 27 major banks are on board with 3 lakh merchants so that they can start accepting payments using BHIM-Aadhaar.

Chief economic adviser Arvind Subramanian, however, admitted that it was too early to jump to conclusion and it would be advisable to watch the impact over the long run. The second volume of the government’s economic report card tabled in Parliament on Friday, estimated that that compared to the normal growth trajectory, the cash in the system was 20% lower, and the sudden move had also resulted in a shift to electronic and plastic payment tools. On the assumption that the process of remonetisation is complete, the Survey pointed out that cash as a share of both GDP and money supply has decreased. The cash to GDP ratio has declined by about 1.6 percentage points to 9.7% and as a proportion of money it has fallen by 5 percentage points to around 59%. Separating the impact of demonetisation on tax compliance, the Survey concluded that as many as 5.4 lakh tax payers, or 1% of all individual taxpayers, came on board. But, its impact in terms of tax collections was muted. This is because the average income of the new taxpayer was Rs 2.7 lakh, an income level which represents a modest increase over the tax threshold of Rs 2.5 lakh. The addition to the reported tax income was about Rs 10,600 crore.